Week of Feb 27

The week was dominated by geopolitics as world leaders scrambled to coordinate actions ahead of the war's first anniversary in Ukraine. For next week, the focus is on a slew of economic data, including ISM PMIs in the US, to see if resilience in the economy is maintained to justify further rate hikes.

Top Events in Review

Markets were hit by a series of data pointing to central banks likely to keep tightening: 

• US Q4 GDP was revised lower but showed resilience in the face of Fed hikes. FOMC minutes showed that 50bps was discussed, and the focus was not turning on issues related to the tight labour market. 
• Eurozone CPI was revised higher in its final reading to record highs on the headline and core reading. 
• Global flash PMIs came in mixed, with European manufacturing below expectations, the UK beat on manufacturing and services, and US services PMI jumped back into expansion. 
• BOJ governor nominee Ueda gave his much-anticipated testimony before Parliament, affirming support for current policy and refusing to provide details on potential changes to YCC.

Geopolitics is the main focus of news events following a surprise visit by US President Biden to Ukraine on Monday, ahead of a tour of European countries and the anniversary of the war in Ukraine. The US also increased its troop presence in Taiwan. Meanwhile, Russia and China held high-level meetings, with the latter calling for peace talks to end the war. In the UK, initial optimism that an agreement was in reach on the Northern Ireland Protocol was dashed after pushback from DUP and some Tory MPs.

Top Events in the Week Ahead

The week is expected to start with any potential fallout from a series of global meetings over the weekend to address the situation in Ukraine. 

Final Global PMIs Take Center Stage

The primary data events that could rile up the markets next week are the release of the final global PMI figures, which could affirm the narrative that manufacturing continues to be subdued and rotating towards services. 

US Eyes on Durable Goods

After the revision lower in US GDP, the release of January Durable Goods is likely to be in focus, with the reading expected to fall, compared to a gain in December. USD/JPY could see the break above 136.00 triggering a spiral towards 138.00 if the figure surprises to the upside, with 134.00 a short-term support above 132.00.

Europe to Report CPI After Revision

The Eurozone will give a first look at the February CPI change just a week after posting record inflation. Flash February inflation is expected to come down to 8.2% from 8.6% prior, with the core rate staying sticky at 5.2%, just a decimal off the record high of 5.3%. EUR/USD remains pressured under $1.0600 and might reach fresh YTD lows next week if inflation figures disappoint. $1.0480 is the next major support, whereas to the upside, $1.0690 is major resistance.

Commodity GDP Figures

Canada is expected to report Q4 GDP figures in the context of the BOC holding rates steady. Annualised growth is expected to fall to 0.9% from 2.9% recorded in the third quarter. Loonie might head towards $1.3700 if bullish momentum continues to accelerate, with a revisit of $1.3500 adding bias towards 1.3342.

On the opposite side of the world, Australian GDP is expected to grow at 2.5% at an annualised rate, down from the 5.9% recorded in the previous quarter, which was affected by the post-covid rebound. Aussie trades in a similar fashion to the eurodollar counterpart. $0.6688 is a major barrier for a bounce and might be on the radar of traders. On the flip side, bulls will need to reclaim $0.6850 for any sort of decent respite.

Consumers Back in Focus

A series of countries report retail sales data from January, giving some insight into the resilience of consumers in the wake of inflation as we experience a rotation towards services. In the US, the Conference Board publishes its consumer confidence figures, which are expected to show a strengthening in the consumer. Japanese consumer confidence is also expected to increase.

Other Events, and Earnings

Monday has European Economic Sentiment. Tuesday includes ANZ Business Confidence and US trade balance. Wednesday has UK consumer credit figures. The UK Nationwide Housing Prices come out on Thursday. Friday features the German trade balance. 

A slowing earnings season will see a final rush of reports around the end of the month, with Occidental Petroleum, AB Foods, Target, Salesforce, Lowe's, Bayer, Broadcom, Costco, Anheuser-Busch, Man Group, Flutter, Hibbett, Puma, Reckitt Benkiser among the names expected to report.